A recent study reveals that implementing a climate fee on food could significantly reduce greenhouse gas emissions in Germany’s agriculture sector while maintaining social balance through a dividend system.
Agriculture is responsible for approximately 8% of Germany’s greenhouse gas (GHG) emissions. However, a new study, published in the journal Food Policy, indicates the sector could cut emissions by 22.5%, or more than 15 million tonnes of GHG annually, if food prices reflected the social cost of carbon.
“[E]missions within this sector could be reduced by 22.5% or over 15 million tonnes of GHG annually if the social cost of carbon were reflected in food prices,” lead author Julian Schaper, a guest scientist at the Potsdam Institute for Climate Impact Research (PIK), said in a news release.
The study examines the implications of introducing a climate fee of around €200 per tonne of GHG on emission-intensive products like meat and dairy. While prices for sustainable products would see modest increases — yogurt and milk by about 25 cents per kilogram — beef prices could surge by more than €4 per kilogram. This fee structure is designed to influence consumer behavior, encouraging the purchase of less carbon-intensive foods such as vegetables.
“Households would tend to buy more food that is less carbon-intensive on average, such as vegetables. A climate fee would not only directly benefit climate protection but could also encourage sustainable consumption,” added co-author Max Franks, a PIK scientist.
The researchers employed a demand model to assess how German households would respond to these price changes. Their findings show that the climate fee could generate €8.2 billion annually, which could then be redistributed as a climate dividend to consumers. This system would significantly benefit lower-income households, while wealthier households would bear slightly higher costs.
“This form of redistribution helps to create a social balance that can promote the acceptance of such measures,” Franks added.
The Federal Climate Change Act of 2019 set an ambitious goal for Germany: to reduce annual emissions from 62 million tonnes to 56 million tonnes of GHG by 2030. Incorporating the social cost of carbon into food prices could be a significant step toward achieving these targets.
The authors of the study believe the combination of a climate fee and a dividend could gain broad public acceptance. Effective communication highlighting the dual benefits of emission reduction and financial redistribution is key to earning public support.
This model presents a compelling picture of how economic measures can be designed to both combat climate change and support social equity. With Germany committed to its climate goals, this study offers a promising pathway to achieve meaningful emission reductions in the agricultural sector.